VRA Update: If The FED Raises Rates, The Money Cartel Wants Trump to Win

If you’re like me, and if you’ve become sick and tired…jaded really…about Janet Yellen’s FED meetings, then you’re also joining more than 80% of all investors in the stock market that have come to distrust the FED and their constant threats of a “FED rate hike”. And Barron’s surveys are pretty widely trusted. Yes…we’ve been down this road…in fact we’ve driven thousands of miles, down this exact rode. 

As you can read below, in an excellently researched piece from the LA Times, while the market is putting the odds of a FED rate hike at less than 15%, research shows that over the last 35 years there has been just ONE rate hike within two months of a presidential election. 

And no…tomorrow’s FED decision will not become the second time.

In fact, let me take this a step further; Should the FED raise rates tomorrow, we will know with certainty that the financial/central bank cartel wants Trump to win.

Yes, you heard that right. And folks, you can take this one to the bank…in my absolute view...so let me repeat for clarity. If interest rates go up tomorrow (roughly 2PM EST announcement), we will then know that the FED and shadow money gang is ALL IN for Trump. 

Here’s how I know this to be true. A FED rate hike is NOT expected (again, just 15% of Wall Street experts predict one)…meaning that US and global markets will go into a tizzy, should the FED surprise everyone with a hike. Remember, the stock market hates surprises. We also know that the FED rarely raises rates just before an election (once in 35 years). 

We also know that elections are about the economy. “It’s the economy, stupid”…THE catch phrase that put Bill Clinton in office (along with Ross Perot, the independent that got 19.7% of the vote…making a second Bush term impossible. 

Ipso facto, should the FED raise rates, the status quo will be upended…and HRC is the status quo…and the FED will have told us loud and clear that they want Trump to win.

I could be wrong…but somehow I don’t think the FED wants Trump to win…do you??

VRA Market Update

In my next update I will include complete VRA System analysis…sector by sector. But for now, know this; the broad markets have worked off their overbought levels and look primed for another move higher. However..and this is important…the major averages are now below their 50 day moving averages. In order for the market to continue higher, this must change. 

As I’ve been writing, the markets are also waking up to the possibility of a Trump presidency. And, while I happen to believe this would be a major long term positive for the economy and stock prices, lets never forget that “the market hates surprises”.

Beginning this weekend, I began seeing signals that Hillary could well leave the race…handing the reigns over to either Uncle Joe or Bernie. The rumors are out there…this is not merely a conspiracy theory…leading Dem’s have admitted that the conversations have happened. If the establishment is as nervous/panicked about a Trump prez as I continue to hear…and if they see HRC as having no chance to win…this is the week that the change would need to be made. Stay tuned…again, in my view, the change would have to be made this week. HRC can blame it on her health…bow out gracefully…and Dems can put all their weight behind Biden (my pick), whom their polls show could beat Trump.

Barring a shock to the market…a FED rate hike or replacing HRC on the ticket…I see the market headed higher still. Here’s why:

1) the internals have been incredibly strong for the last 6 months. The kind of strength you rarely see…and that should take time to dissipate. 

2) After not having hit a new high for over a year, studies show that a new high then produces signifiant gains over the next 6-12 months (10-22%, on average).

3) Interest rates at near zero percent mean that TINA (there is no alternative)…the huge M&A deals and buybacks will continue…removing even more tradeable shares from the market.

4) Investors are overwhelmingly bearish…bull markets simply do not end, when investors are bearish. Bull markets end when investors are euphoric and quitting their jobs to day trade. 

To this end, I am looking for opportunities to go long.

Until next time, thanks again for reading…

Kip

Here’s the FED piece…again, if they raise rates, they want Trump to win. 

Is Fed Politically Biased? A Look At Interest-Rate Decisions As Elections Near

JIM PUZZANGHERA, DON LEE

Los Angeles Times

The presidential election was exactly four weeks away and Federal Reservepolicymakers were wrestling with the potential political blowback of lowering a key interest rate to stimulate the economy.

One official said he "thought it was conventional wisdom that we weren't expected to act so close to an election," according to a transcript of the closed-door Oct. 6, 1992, meeting. Another said that there was "a strong argument that the credibility" of the rate-setting Federal Open Market Committee "would be hurt by our doing something close to an election."

Finally, Fed Chairman Alan Greenspan weighed in.

"I wish we had the luxury to sit back and do nothing until after the election, as is the conventional procedure of the Federal Open Market Committee," he said. "I don't think we have that luxury." Nonetheless, the committee voted not to change rates.

Every four years, the independent Fed faces the same predicament: how to try to manage the economy without appearing to favor either party's presidential nominee.

Those concerns will be front and center this week as Fed policymakers meet to consider a small hike in their benchmark short-term interest rate in the midst of a heated campaign.

But this time the stakes are higher because of sharp criticism of the central bank from both major political parties. And experts said that probably reduces the already low chances of a rate hike before the election.

Last week, Republican presidential nominee Donald Trump fired his latest shot at the Fed. He said Fed Chairwoman Janet L. Yellen "should be ashamed of herself" for keeping the rate near zero for so long.

"It's staying at zero because she's obviously political and doing what Obama wants her to do," Trump told CNBC.

Yellen is a Democrat who was nominated by Obama in 2013, although she's continuing the low-rate policies begun by her predecessor, Ben S. Bernanke, a registered Republican in 2005 when he was first nominated for the job by President George W. Bush.

A rate hike could slow the economy and that might hurt the chances of Democratic presidential nominee Hillary Clinton, whose economic policies are largely a continuation of Obama's.

Clinton said Trump shouldn't be commenting on Fed monetary policy actions. But she's been critical of the Fed for other reasons.

This past spring, Clinton joined many top liberals in criticizing the lack of diversity in the Fed's leadership and called for bankers to be banned from serving on the boards of the 12 regional Fed banks.

Yellen has said that the upcoming election won't factor into the Fed's interest-rate decisions.

"We are very focused on assessing the economic outlook and making changes that are appropriate without taking politics into account," Yellen said at a June news conference when asked about the effect of the election.

But history shows that a desire at the Fed to appear non-partisan has made rate increases rare in the weeks before a presidential election.

That has helped pushed down the odds of a small hike this week — already a long shot because of some lackluster economic data — to about 15 percent, according to a closely watched barometer by the CME Group futures exchange.

Investors and analysts have mostly written off any chance of an increase at the Fed's next meeting on Nov. 1-2 because it is so close to Election Day.

Bernadette Kilroy Martin, associate director of the GailFosler Group, a business advisory firm, studied the impact of presidential elections on interest rate moves and found only one hike within two months of an election — in 2004 — since the Fed's rate-setting committee began announcing its decisions in 1984.

Economic conditions in 1988 and 1996 pointed toward the need for increases, but the Fed held off on moves within two months of the election, Martin found.

The Fed has cut the interest rate within two months of a presidential election on three occasions since 1984, she said.

A rate increase is designed to slow the economy while a rate cut, which lowers the cost of borrowing, is intended to stimulate growth.

Speculation that the Fed has affected presidential elections — intentionally or not — are not new.

White House tape recordings show that President Richard Nixon pressured Fed Chairman Arthur Burns to enact an expansionary monetary policy to improve Nixon's chances of re-election in 1972. Burns pushed such a policy through the Fed, though it's not clear if it was because of the pressure.

Interest rate hikes to battle high inflation in the late 1970s under Fed Chairman Paul Volcker are partly blamed for President Jimmy Carter's defeat in 1980.

And former President George H.W. Bush attributed his 1992 re-election loss to Greenspan's failure to cut interest rates more aggressively during the 1990-91 recession.

"I reappointed him and he disappointed me," Bush said in a 1998 TV interview.

Former Fed Vice Chairman Donald Kohn, who retired in 2010 after a long career at the central bank, said it was "as non-political an institution … as you could design."

"I've never heard anyone — and I went to 30 years of FOMC meetings — say we should do this because in some sense it would favor one side or the other. or we shouldn't do it for political reasons," said Kohn, now a senior fellow at the Brookings Institution think tank. "It really hasn't been a factor."

Still, because the Fed chair and governors are nominated by the president, questions about their political leanings arise during campaigns.

Lael Brainard, a Fed governor nominated by Obama in 2014 after she served as a top Treasury official in his administration, has fueled such speculation by contributing $2,700 to Clinton's campaign. Fed policymakers aren't barred from giving money to presidential campaigns, but such contributions are unusual.

Barney Frank, a Massachusetts Democrat and former House Financial Services Committee chairman, doesn't think the economy is strong enough for a rate hike right now. But he said the risk that a hike before the election would be interpreted politically is another reason for the Fed to stand pat.

"This close to an election, there should be a bias toward not acting rather than acting," he said.